SPANISH INCOME TAX DECLARATION
It´s that time of the year again where so many people experience a very strange combination of emotions that range from frustration to fear to confusion and everything in-between. Why? Spanish Tax Declaration! If you are American or British, you are already familiar with the IRS and HM Revenue and Customs. Even in English it can be a nightmare to deal with income tax declarations.
If you have been living here for a while, you will be very familiar with this set of emotions. If you are new or if this is your first time dealing with Tax Declarations, don´t worry – we have a very detailed guide for you that will simplify everything and make it less scary.
WHO HAS TO DO IT?:
First of all, you need to know if you are required to even do the declaration to begin with. If you are earning more than €22,000 per year (whether self-employed or employed by someone) or if you´ve changed jobs in the last year and your employer paid you more than €1500, you have to declare your income tax. The taxable income is determined as the difference between the income earned and the expenses that are deductible. Also, you are considered a tax resident if you reside in Spain for more than 182 days per year.
If you are an employed worker, your personal income tax setup is quite simple. There exists a ‘pay-as-you-earn’ system where the employer deducts the relevant tax contribution throughout the tax year. This means that you should have nothing more to pay. They have improved this system in such a way that this amount matches as closely as possible with your tax liability and allowances. However, if you work for an employer, even though income tax is deducted from your salary, you would still be responsible for filing your tax returns, not your employer.
The financial year in Spain is a calendar year, so 1 January – 31 December. However, the “Declaración” period usually starts at the beginning of April and the deadline to submit returns is on 30 June.
HOW DOES IT WORK:
Typically you will receive a draft document called a “borrador”, which will show your total income for the year as well as any contributions to social security etc. This document will also indicate what the outcome of your tax returns are (whether you are owed taxes or whether you owe them). In the past this was a very manual process but now you can do everything on the website of AETA (the Spanish Tax authority). Just Google “Agencia Tributaria”.
From there you can obtain a special access code which you can use to enter and see your draft online and make changes as necessary from there using the PADRE system. If you are happy with your draft, you can confirm that it is correct OR you can make the necessary amendments, which include adding deductibles (see below), changing your address or marital status, etc. Note: The “PADRE” can also be downloaded to your computer as a program. From there you can also make modifications and submit your returns.
From the 5th May, you would be able to make an appointment to visit their office by calling 901 22 33 44 to discuss the draft in person, or to simply submit the draft. Unless you speak fluent Spanish and are very familiar with Spanish Tax laws, we wouldn´t recommend this. It´s much easier for you just to do everything on their website.
26th June is the deadline for any direct debits from your bank account if you do end up owing taxes. You will note however that if you do owe taxes, you have the option of paying the amount in 2 installments. Either way you will need to inform them that you wish to do so before this date.
WHAT CAN I DEDUCT?
Quite a lot, actually. Depending on your personal circumstances, there are a number of expenses that you can deduct from your income tax, thereby resulting in most cases in a situation where you actually might go from owing money, to getting some back! Bear in mind that each region in Spain has different rules about what can be deductible and at what percentage. The information below is valid for Catalunya.
RENT: If you earn less than 24,107.20 Euros, you would be able to deduct 10.05% of your annual rental expense! Keep in mind you need to have been less than 32 years old on 31st December 2014.
PENSION: If you are contributing to a private pension plan, you can deduct 10% of the total pension paid in the year, up to €300.
CHILDREN: If you had a child born in the last fiscal year, you would be entitled to €1836 deduction (this increases per successive child born)
There are also other deductible expenses such as contributions to charities, any costs involved in home improvements, deductions for properties that you rented out, etc.
As we mentioned earlier, if you have a decent level of Spanish, it is quite easy to use the website to declare your income taxes, make any changes that you feel haven´t been taken into consideration, or even to pay outstanding taxes or get them back.
However if you still feel like you would rather let a professional take care of this for you, we would be happy to provide you with the contact details of a qualified accountant who could do this for you. The price for the service is usually around €70 but would depend on your circumstances.
Just drop us a line and we´ll get back to you.